Available online at www.sciencedirect.

com

Research Policy 37 (2008) 407429

Analyzing the functional dynamics of technological

innovation systems: A scheme of analysis
Anna Bergek a, , Staffan Jacobsson b , Bo Carlsson c ,
Sven Lindmark d , Annika Rickne e
a Department of Management and Engineering, Linkoping University, SE-581 83 Linkoping, Sweden
bDepartment of Energy and Environment, IMIT and RIDE, Chalmers University of Technology, SE-412 96 Goteborg, Sweden
c Weatherhead School of Management, Case Western Reserve University, 11119 Bellflower Road, Cleveland, OH 44106-7235, USA
d IMIT, RIDE and Department of Innovation Engineering and Management, Chalmers University of Technology, SE-412 96 Goteborg, Sweden
e Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), Lund University, Box 118, SE-22100 Lund, Sweden

Received 18 January 2006; received in revised form 4 May 2007; accepted 19 December 2007
Available online 11 February 2008

Abstract
Various researchers and policy analysts have made empirical studies of innovation systems in order to understand their current
structure and trace their dynamics. However, policy makers often experience difficulties in extracting practical guidelines from
studies of this kind. In this paper, we operationalize our previous work on a functional approach to analyzing innovation system
dynamics into a practical scheme of analysis for policy makers. The scheme is based on previous literature and our own experience
in developing and applying functional thinking. It can be used by policy makers not only to identify the key policy issues but also
to set policy goals.
2007 Elsevier B.V. All rights reserved.

Keywords: Innovation system; Dynamics; Functional analysis; Policy

1. Introduction as a more appropriate alternative. In particular, the con-

Scholars on innovation and technology have almost
completely rejected the market failure approach as a
basis of policy action. It is argued repeatedly in the
literature (e.g. Malerba, 1996; Metcalfe, 1992, 2004;
Smith, 2000) that the approach is flawed and insuffi-
cient. A systems approach to innovation is often seen
Corresponding author. Tel.: +46 13 28 25 73;
fax: +46 13 28 18 73.
E-mail addresses: anna.bergek@liu.se (A. Bergek),
staffan.jacobsson@chalmers.se (S. Jacobsson),
Bo.Carlsson@case.edu (B. Carlsson), sven.lindmark@chalmers.se
(S. Lindmark), annika.rickne@circle.lu.se (A. Rickne).
cept of innovation system has won the approval of an
increasing number of academic researchers interested
in the processes underlying innovation, industrial trans-
formation and economic growth. The innovation system
approach has also been adopted by regional and national
authorities/agencies as well as by international organi-
zations (e.g. the OECD, the European Commission and
UNIDO) interested in stimulating these processes.
Various researchers and policy analysts have made
attempts to study innovation systems empirically in order
to describe and understand their structure, dynamics and
performance. However, recent surveys of the literature
(e.g. Edquist, 2004; Liu and White, 2001) have acknowl-
edged the lack of comparability between these studies

0048-7333/$ see front matter 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.respol.2007.12.003
408 A. Bergek et al. / Research Policy 37 (2008) 407429
as well as the conceptual heterogeneity in the innovation
system literature. Perhaps as a consequence of this, the
innovation system approach has been criticized for not
providing practical enough guidelines for policy mak-
ers (cf. Edquist, 2004; Klein Woolthuis et al., 2005).
There is, thus, a need for a practically useful analyti-
cal framework that allows for the assessment of system
performance as well as the identification of factors influ-
encing performance.
This paper presents a scheme of analysis which
addresses these issues and may be used by researchers,
as well as policy makers, to analyze specific innova-
tion systems in order to identify key policy issues and
set policy goals. The contribution is twofold. First, the
paper describes a systematic step-by-step approach to
analyzing innovation systems, describing and assessing
performance and identifying key policy issues.1 Sec-
ond, and most important, the paper presents a framework
that not only captures the structural characteristics and
dynamics of an innovation system, but also the dynamics
of a number of key processes, here labeled functions,
that directly influence the development, diffusion and
use of new technology and, thus, the performance of
the innovation system. The functions have been synthe-
sized from a number of different system approaches to
innovation and provide a basis for performance assess-
ment as well as comparison between different innovation
systems in terms of system dynamics.
The paper is organized as follows. In Section 2, we
position ourselves in the innovation system literature and
explain how our approach on functions in innovation sys-
tems was developed. In Section 3, we outline the scheme
of analysis. Section 4 summarizes our conclusions and
presents some recommendations for further research.
2. Positioning and development of the analytical
approach
2.1. Innovation system as an analytical construct
A general definition of a system is a group of com-
ponents (devices, objects or agents) serving a common
purpose, i.e. working towards a common objective or
overall function. The components of an innovation sys-
tem are the actors, networks and institutions (Carlsson
and Stankiewicz, 1991) contributing to the overall func-
1 The scheme of analysis was developed as part of a collaborative
project with VINNOVA (the Swedish Agency for Innovation Systems)
(see Bergek et al., 2005). In this project we also analyzed three empiri-
cal cases (IT in home care, Mobile data (see Lindmark and Rickne,
2005) and Biocomposites) in collaboration with VINNOVA.
tion of developing, diffusing and utilizing new product
(goods and services) and processes (cf. Bergek, 2002
Carlsson and Stankiewicz, 1995; Galli and Teuba
1997).
Although the system concept may suggest collectiv
and coordinated action, an innovation system is primar
ily an analytical construct, i.e. a tool we use to bette
illustrate and understand system dynamics and perfor
mance. This implies that the system in focus does no
have to exist in reality as fully-fledged. Instead, it ma
be emerging with very weak interaction between com
ponents.
Moreover, interaction between components may b
unplanned and unintentional rather than deliberate eve
in a more developed innovation system. Using the notio
of an overall function does not imply that all actor
in a particular system exist for the purpose of servin
that function or are directed by that function. Actors d
not necessarily share the same goal, and even if the
do, they do not have to be working together consciousl
towards it (although some may be). Indeed, conflicts an
tensions are part and parcel of the dynamics of inno
vation systems.2 Clearly, we do not see the system
components as directed or orchestrated by any specifi
actors.
A number of different innovation system concept
have been put forward in the literature, including nationa
systems of innovation (Freeman, 1987; Lundvall, 1992a
Nelson, 1992), regional innovation systems (Asheim an
Isaksen, 1997; Cooke et al., 1997), sectoral systems o
innovation and production (Breschi and Malerba, 1997
Malerba, 2002) and technological systems (Carlsson an
Stankiewicz, 1991).3 There are also other similar socio
technical system concepts (cf. Bijker, 1995; Geels, 2004
Hughes, 1983). In this paper, we focus on technolog
ical innovation systems (TIS) (Bergek et al., 2007a)
i.e. socio-technical systems focused on the developmen
diffusion and use of a particular technology (in terms o
knowledge, product or both).4
2 Schumpeterian competition is a vital part of vibrant innovation sys
tems, and firms and other actors also compete in shaping expectation
of a technology and in building legitimacy for it.
3 For an overview, see Carlsson et al. (2002) and Edquist (1997).
4 The concept of technology incorporates (at least) two interrelate
meanings. First, technology refers to material and immaterial objec
both hardware (e.g. products, tools and machines) and software (e.g
procedures/processes and digital protocols) that can be used to solv
real-world technical problems. Second, it refers to technical know
edge, either in general terms or in terms of knowledge embodied i
the physical artifact. In line with Layton (1974) and Das and Van d
Ven (2000), we include both of these meanings (i.e. both artifact an
knowledge) in our definition of technology.
 A. Bergek et al. / Research Policy 37 (2008) 407429
TISs do not only contain components exclusively ded-
icated to the technology in focus, but all components that
influence the innovation process for that technology. A
TIS may be a sub-system of a sectoral system (when the
focus is one of the sectors products or a knowledge field
that is exclusive to the sector) or may cut across several
sectors (when the focus is a more generic knowledge
field that several sectors make use of, e.g. microwave
technology (see Holmen and Jacobsson, 2000)). TISs
may have a geographical dimension, but are often inter-
national in nature.5
2.2. Previous innovation system approaches to
innovation policy6
A central proposition in the systems literature on
policy is that just as the nature of actors/markets may
obstruct the formation of a TIS, so can institutions and
networks (e.g. Carlsson and Jacobsson, 1997; Edquist,
1999; Malerba, 1996; Metcalfe, 2004; Rotmans et al.,
2001; Unruh, 2000). Eventually, such weaknesses in
system structure may lead to system failure, i.e. a sys-
tem that fails to develop or does so in a stunted fashion
(Carlsson and Jacobsson, 1997).
Most of the literature discussing innovation system
failure tends to focus on perceived weaknesses in the
structural composition of a system. For example, all
the four types of system failures identified by Klein
Woolthuis et al. (2005) in their recent synthesis and
re-categorization of previous system failure literature
are related to structural components: infrastructural fail-
ures (related to actors and artifacts), institutional failures
(related to institutions), interaction failures (related to
networks) and capabilities failures (related to actors).
However, it is difficult, if not impossible, to evaluate the
goodness or badness of a particular structural ele-
ment or combination of elements without referring to
its effects on the innovation process. For example, how
do we know whether the existence of a particular actor
network is a strength (e.g. a source of synergy) or a weak-
ness (e.g. a source of lock-in or group-think) (cf. Klein
Woolthuis et al., 2005), without identifying its influence
on the innovation process and its key sub-processes?
Thus, in order to be able to identify the central policy
issues in a specific innovation system, we need to sup-
plement a structural focus with a process focus. In this
5 A TIS with a high degree of regional concentration comes close
to the definition of a technological cluster or region (cf. Cantner and
Graf, 2004; Maskell, 2001; Porter, 2000).
6 This section is based on Bergek et al. (2007b).
409
paper, we present a framework outlining seven key pro-
cesses here labeled functions which have a direct
and immediate impact on the development, diffusion and
use of new technologies, i.e. the overall function of the
TIS as defined above. It is in these processes where pol-
icy makers may need to intervene, not necessarily the
set-up of the structural components (actors, networks,
institutions). The functions approach to innovation sys-
tems thus implies a focus on the dynamics of what is
actually achieved in the system rather than on the
dynamics in terms of structural components only. This
is, indeed, its main benefit: It allows us to separate struc-
ture from content and to formulate both policy goals and
policy problems in functional terms.7 We will return to
this point.
2.3. The development of the functional dynamics
approach
As noted previously, concerns have been raised with
regard to the conceptual heterogeneity of the innova-
tion system concept. This was one of the starting points
of the functional dynamics approach presented in this
paper: our first identification of a number of functions
(Johnson, 19988 ) was made in an attempt to see whether
there was any agreement between different innovation
system approaches with regard to what they described
happened in the system and, if so, to identify the
key processes that they agreed upon. A scrutiny of the
received literature revealed that the system approaches
indeed shared an understanding of a set of such basic
functions, defined as the contribution of a component
or a set of components to the overall function of the
innovation system (Johnson, 1998, 2001).9
The first list of functions/processes was, thus, identi-
fied through a scrutiny of a number of central innovation
7 For example, the lack of research institutes has often been identified
as a major problem in the Swedish National Innovation System, without
much empirical evidence that this structural characteristic influences
innovation processes in any important way. By focusing on functions,
we could be able to analyze how research institutes in other countries
influence the innovation process, and then see if this type of influence
is absent in the Swedish system or if the same type of influence is
present through another type of actor.
8 Johnson was Anna Bergeks maiden name.
9 It should be noted here that we use the concept of functions
without any reference to the sociological concepts of functionalism
and functional analysis. Our analogy is instead technical systems,
with hard system components filling different technical functions,
thereby contributing to the systems overall (technical) function. As
noted previously, the overall function is analytically defined and
does not imply that actors exist for the purpose of serving that function
or are directed by it.
410 A. Bergek et al. / Research Policy 37 (2008) 407429
system references, including work by Christopher Free-
man, Richard Nelson, Charles Edquist, Bengt-Ake
Lundvall, Bo Carlsson and Rikard Stankiewicz, com-
plemented with literature on related concepts such as
socio-technical systems (e.g. Wiebe Bijker and Thomas
P. Hughes), development blocs (e.g. Eric Dahmen) and
industrial networks and clusters (e.g. Hakan Hakansson
and Michael Porter). The processes described in this lit-
erature were categorized into a list of eight functions
(Johnson, 1998).10 A similar list of functions was later
developed through an empirical study of the biomaterials
industry (Rickne, 2000).
Through empirical application,11 additional literature
studies and discussions amongst ourselves and with other
researchers pursuing similar approaches, the list has been
revised and refined several times. We have added insights
from political science (e.g. Sabatier, 1998), sociology of
technology (e.g. Kemp et al., 1998) and organization
theory (e.g. Van de Ven, 1993), which in particular have
highlighted the political nature of the innovation process
and the importance of legitimation. The current frame-
work, which we present in detail later on in this paper,
includes seven functions on which there is quite large
agreement between different functions approaches (see
Appendix A for a description and comparison of various
contributions).12
Since the framework presented here is based on pre-
vious literature, it is perhaps reasonable to assume that a
conventional innovation system analysis would iden-
tify the same processes (although termed differently).
However, this does not seem to be the case. First, Edquist
(2004) identifies a number of activities, defined as
those factors that influence the development, diffusion,
and use of innovation (p. 190). Some of these activi-
ties are, however, structural in nature (e.g. creation of
organizations). Moreover, since several of the activities
are much more specific in nature than our functions (e.g.
incubator support vs. resource mobilization), they
do not cover all aspects of our functions (see Appendix
A). Second, in a recent paper (Bergek et al., 2007b) we
concluded that although most of our functions were men-
tioned in the Policy and innovation system literature
of the 1990s (largely), none of the literature we reviewed
10 We searched for references of things that happened, took place
or were done (by any component) in the innovation system. All these
were typed into categories that were assigned a label. These labels were
used as names for the first functions.
11 See Bergek and Jacobsson (2003), Jacobsson and Bergek (2004),
Jacobsson et al. (2004), Bergek et al. (2005), and Hekkert et al. (2007).
12 We do not claim this to be a complete and final set of functions.
Additional studies will have to refine and possibly add to the list.
mentioned all functions at the same time. Instead, polic
researchers seemed to focus on a few functions or o
general policy problems to be solved, often in an unsys
tematic way and without stating any clear reason fo
that particular focus.13 In addition, two of our function
(development of positive externalities and legitima
tion) were either mentioned in passing or completel
left out, which is surprising since their importance ha
been noted in several other strands of literature that w
have reviewed. Here lies the main difference between th
functions approach and conventional innovation sys
tem analyses with respect to key processes: explicitl
stating and including all functions, which allows for th
systematic identification of policy problems. It shoul
be noted, though, that this list of functions may requir
further revisions as and when the research on innovatio
system dynamics provides new insights.
3. The scheme of analysis
A scheme of analysis is a description of a numbe
of sub-analyses in the following referred to as steps
that need to be taken by the analyst. Our approac
implies that the analyst needs to go through six such step
(Fig. 1). The first step involves setting the starting poin
for the analysis, i.e. defining the technological innovatio
system (TIS) in focus. In the second step, we identify th
structural components of the TIS (actors, networks an
institutions). In the third step, we move from structure t
functions. With an analysis of functions, we first desire t
describe what is actually going on in the TIS in terms o
the seven key processes where we come up with a pictur
of an achieved functional pattern, i.e. a description o
how each function is currently filled in the system. Th
subsequent fourth step is normative; we assess how wel
the functions are fulfilled and set process goals in term
of a desired functional pattern. In the fifth step, w
identify mechanisms that either induce (drive) or bloc
a development towards the desirable functional pattern
We can then specify key policy issues related to thes
inducement and blocking mechanisms, and this is th
sixth and final step.
It should be noted that the analysis will most often no
proceed in a linear fashion (as the focus on steps migh
suggest). In contrast, the analyst has to expect a grea
number of iterations between the steps in the process o
the analysis. For reasons of simplicity, however, we wil
discuss the six steps sequentially.
13 Malerba (1996) and Carlsson and Jacobsson (1997) are the mai
exception, covering most of our functions.
 A. Bergek et al. / Research Policy 37 (2008) 407429 411

Fig. 1. The scheme of analysis (adapted from Oltander and Perez Vico, 2005).

In the following, we will articulate the analytical con-
tent as well as some methodological opportunities and
problems for each step. We use a number of empirical
examples to illustrate our reasoning. These should be
seen as light illustrations rather than empirical evi-
dence of the validity of the framework.14
4. Step 1: the starting point for the analysis:
defining the TIS in focus
The empirical operationalization of the TIS concept
is not always as straightforward as it may seem at a
first glance. Indeed, analysts face several choices when
it comes to deciding the precise unit of analysis or
focus of the study. The outcome of these choices deter-
mines what particular TIS is captured, with respect to
both structure and functions, and it is therefore crucial
to make a deliberate choice, to re-evaluate this through-
out the analysis, to draw conclusions as to how the
choice of starting point has affected the picture painted,
and to communicate the unit of analysis clearly to the
recipients of the analysis, be they policy makers or
other researchers. Nevertheless, this is often neglected
in empirical analyses, and the failure to make explicit
14 Most examples draw from longer texts of ours that are avail-
able: Holmen and Jacobsson (2000), Rickne (2000), Bergek and
Jacobsson (2003), Jacobsson and Bergek (2004), Jacobsson et al.
(2004), Lindmark and Rickne (2005) and Jacobsson and Lauber
(2006).
the precise unit of analysis seems to be one reason why
it is difficult to compare the results of different studies.
We will outline three types of choices that analysts
need to consider: (1) the choice between knowledge field
or product as a focusing device, (2) the choice between
breadth and depth, and (3) the choice of spatial domain.
In this, there is no one correct choice the starting point
depends on the aim of the study and the interests of the
involved stakeholders (e.g. researchers or policy mak-
ers).
It follows from our definition of technology (see also
footnote 4) that the focus of attention may either be
a knowledge field or a product/artifact, and the anal-
ysis first involves choosing between these two as the
starting point. One common and straightforward
starting point for the analysis is in terms of a product
or product group, for instance a wind turbine (Bergek
and Jacobsson, 2003) or a machine tool (Carlsson and
Jacobsson, 1993). Another option is to start the anal-
ysis in a technological knowledge field (Holmen and
Jacobsson, 2000). A researcher will presumably choose
a focus that reflects the nature of the question raised,
whereas policy makers will choose a definition that suits
their area of responsibility, which for example may be a
knowledge field, a particular product or a product group.
Having decided on product vs. knowledge field as a
practical way of proceeding, we need to choose breadth
of the study. A first choice concerns the level of aggre-
gation of the study. This is relevant for both alternatives
but is most prominent when dealing with a particular

En el caso de los Bio - plsticos, por ejemplo, parece que nos movimos del rea de conocimiento: biotecnologa de plsticos orgnicos, hacia la opcin de
Grupo de Productos (que comparten un insumo orgnico biobased, y una propiedad: biodegradable), entre los que se encuentran:PLA, PHA y Starch Blends.
412 A. Bergek et al. / Research Policy 37 (2008) 407429
knowledge field. In addition, focusing on a knowledge
field involves determining the range of applications in
which the technology is relevant. Let us elaborate on
these two points.
First, a decision on the level of aggregation of the
study means that we choose between including much, in
order to get a broad picture, or being more specific, in
order to be able to go more into detail. Certainly, the defi-
nition of the knowledge field to study may be very narrow
(e.g. stem cells) or much broader (e.g. IT). It may also be
defined as one specific knowledge field (e.g. microwave
technology; see Holmen and Jacobsson, 2000) or as a set
of related knowledge fields (e.g. biocompatible materi-
als; see Rickne, 2000).15
Second, there is a choice of the range of applications
of the technology in question that should be included
in the study. The analysis may be limited to its use in
specific applications, products or industries. Take the
emerging application of IT in home care, where a TIS
may be defined by the use of a generic technology (IT)
in a particular application: care of elderly and ill people
in their homes instead of in a hospital. Here, a certain
application dictates what actors, networks and institu-
tions will be included in an analysis. In other cases, the
study may include all possible applications. This was,
for instance, done by Holmen and Jacobsson (2000) for
microwave technology.
To illustrate further the need to make deliberate
choices regarding the focus of the TIS, we may take
the case of an analyst interested in the emerging field of
biocompatible materials and the associated products of
bio-implants, drug delivery and artificial organs. Such
a TIS may be defined in terms of the products or by
the underlying knowledge fields. If the second alterna-
tive is chosen, the analysis could be focused on some of
the underlying technologies (e.g. some types of biopoly-
mers) or on all of them. Furthermore, the boundaries of
the system could be set to some specific applications
(e.g. medical applications) or all (e.g. include also envi-
ronmental applications; see Rickne, 2000). Depending
on the choices made, different sets of actors, networks
and institutions will be incorporated, and thus we cap-
ture different TISs or see different parts of the overall
picture.
Finding the appropriate focus may not always be
straightforward. When the analyst is new to a case, it
15 Technical change often involves the combination of many technolo-
gies and complementary products/services, which all need to evolve
for the value of an initial innovation to materialize. This implies that
no matter how narrow or broad the starting point of the analysis is, the
analyst needs to be aware of and include related dynamics.
may be necessary to have a broad starting point, and nar
row it down as the understanding of the TIS increase
and narrower potential foci are identified. For example
in an earlier study two of us analyzed the larger, produc
group based, Swedish TIS for renewable energy tech
nology (including, e.g. wind turbines, solar cells, sola
collectors and bioenergy) (see Johnson and Jacobsson
2001), after which we narrowed our focus and analyze
the TIS for wind turbines (see Bergek and Jacobsson
2003). The first step was necessary for us to begin t
understand the features of the field of renewable energ
in general, without which we would not have been able t
continue with our in-depth case study of wind turbines
In addition, given the large uncertainties involve
when the analysis concerns an emerging TIS, a defi
nite focus may be difficult to choose and may have t
be changed over time. Sometimes, the initial expecta
tions may prove to be quite wrong. For instance, th
early development of laser technology was expected t
find its main application in space warfare, while later th
main application proved to be in CD players. Any earl
focus should therefore be seen as a snapshot valid onl
at a particular point in time. As the analysis unfolds, an
as time passes, we may learn that the initial focus need
to be altered.
As noted in Section 2.1, the analysis does not requir
the focal TIS to exist in reality as a system: An emerg
ing TIS may be analyzed as well and it may, indeed
even be possible and fruitful to analyze a TIS that onl
exists as an idea. For example, the Swedish TIS fo
biocomposites16 today only exists in the form of a num
ber of separate sub-systems, each closely related to on
application (e.g. packaging or furniture). From a polic
perspective, however, it seems to make sense to wor
towards integrating these into one overall TIS, sinc
this may increase learning, knowledge development and
thereby, the rate of development of the system as a whole
A TIS may therefore be defined as an analytical con
struct incorporating hitherto disconnected sub-system
and guide policy makers in their decisions.
Having made the choices specified above, the stud
may also as a complement have a spatial focus. Whil
TISs are generally global in character, there may be rea
sons to focus on a spatially limited part of a particula
16 A composite is a combination of two or more distinct mater
als, usually some type of fibers and a resin matrix. The concept o
biocomposites refers to composite materials, where all input mater
als are renewable in contrast to conventional composites, which ar
petroleum-based. There are also hybrid forms, for example woo
plastic composites that consist of wood fibers in a petroleum-base
matrix.
 A. Bergek et al. / Research Policy 37 (2008) 407429
system in order to capture other aspects, perhaps those
most relevant for a particular set of actors in a national
or regional context. However, a geographical delimita-
tion should not be used alone. Moreover, an analysis
always needs to have a strong international component
simply because a spatially limited part of a global TIS can
neither be understood, nor assessed, without a thorough
understanding of the global context.
5. Step 2: identifying the structural components
of the TIS
Having decided on the focus of the TIS (in a prelim-
inary way), the next step is to identify and analyze the
structural components of the system. First, the actors of
the TIS have to be identified. These may include not only
firms along the whole value chain (including those up-
and downstream), universities and research institutes,
but also public bodies, influential interest organizations
(e.g. industry associations and non-commercial organi-
zations), venture capitalists, organizations deciding on
standards, etc.
To identify actors in a specific industry, there are a
number of available methods. Several of these normally
need to be used:
Industry associations are a good source, as are exhi-
bitions, company directories and catalogues.
A patent analysis may reveal the volume and direc-
tion of technological activity in different organizations
and among individuals and may thus be a useful
tool to identify firms, research organizations or indi-
viduals with a specific technological profile (see
e.g. Andersson and Jacobsson, 2000; Holmen and
Jacobsson, 2000; Rickne, 2000). Identification may
take place even if the various organizations are not
linked in any form (by markets or networks).17
Bibliometric analysis (volume of publications, cita-
tion analysis, etc.) will provide a list of the most active
organizations in terms of published papers, etc., and
these organizations will include not only universities
but also institutes and firms.
17 Patent analysis is, however, far from unproblematic. The link
between patent classes and products is unreliable (Bergek et al., 2004)
and a patent analysis is probably more useful if we choose a knowl-
edge field as the starting point. Yet even here, we cannot conclude that
a firm with patents in a particular class necessarily masters a tech-
nology generally associated with that class. For instance, Holmen and
Jacobsson (2000) carefully scrutinized patents referring to microwave
antennas and found that some patents certainly did not reveal any deep
knowledge in the knowledge field in question.
413
Interviews and discussions with technology or indus-
try experts (gurus) as well as with firms, research
organizations, financiers, etc., is a good way to iden-
tify further actors. This may be called a snowballing
method to identify actors, where each actor may point
to additional participants (see Rickne, 2000).
The second structural component of interest is that
of networks, informal as well as formal. A number
of different types of networks are relevant. Some are
orchestrated to solve a specific task, such as stan-
dardization networks, technology platform consortia,
publicprivate partnerships or supplier groups hav-
ing a common customer. Other networks evolve in a
less orchestrated fashion and include buyerseller rela-
tionships and universityindustry links. In this, some
networks are oriented around technological tasks or mar-
ket formation and others have a political agenda of
influencing the institutional set-up (see e.g. Rao, 2004;
Sabatier, 1998; Suchman, 1995). Social communities,
such as professional networks and associations or cus-
tomer interest groups, may also be important to map.
Formal networks are often easily recognized, whereas
the identification of informal networks may require dis-
cussion with industry experts or other actors, or analysis
of co-patenting, co-publishing or collaboration (e.g. joint
ventures and joint universityindustry projects). In the
case of mobile data,18 the history of the Swedish TIS
shows that networks between the two leading firms (Eric-
sson and Telia) and academic research groups have been
prominent and have contributed to knowledge formation
and diffusion (Lindmark and Rickne, 2005). Sometimes
analysts have to look for subtle signs pointing to the
existence or non-existence of networks. For example,
given that academia and industry failed to communicate
on a specific technical solution to an urgent industrial
problem, we could conclude that learning networks were
weak in the pellet burner industry in Sweden (Johnson
and Jacobsson, 2001).
Third, institutions such as culture, norms, laws, regu-
lations and routines need to be identified (North, 1994).
Generally, institutions need to be adjusted, or aligned,
to a new technology, if it is to diffuse (Freeman and
Louca, 2002). Institutional alignment is, however, not
an automatic and certain process but rather the oppo-
site. Firms compete not only in the market but also
18 Mobile data are here defined as non-voice communications,
where at least one terminal is connected to the system via radio, pro-
viding mobility to the user. It is thus a generic technology which can
be used in a large number of applications, ranging from e.g. simple
SMS to advanced logistics applications.
414 A. Bergek et al. / Research Policy 37 (2008) 407429
over the nature of the institutional set-up (Davies, 1996;
Jacobsson and Lauber, 2006; Van de Ven, 1993).
Institutions may come in a variety of forms and may
influence the TIS in different ways. For example, in the
case of the emerging TIS IT in home care, a key insti-
tution is the procurement policies of the county councils,
which discriminate against smaller suppliers. In the case
of biocomposites, the emerging TIS is influenced by
a number of EU regulations and directives concerning
broad areas such as chemical substances and recycling.
This implies that analysts need to have a broad perspec-
tive when mapping relevant institutions.19 Sometimes it
is the very lack of institutions that is of interest. Again, in
the case of the emerging TIS IT in homecare, a lack of
standardization has led to fragmented markets and poor
incentives for firms to innovate.
For TISs that are only just emerging there are inherent
uncertainties, implying that the identification of struc-
tural components is thorny and many of the sources
mentioned above may be difficult to use. It may prove
hard to recognize the relevant actors when directories
are scarce, no industry associations exist or if the actors
themselves are not aware of belonging to a certain TIS.
This was the case for early studies of the emerging sys-
tem for biomaterials (Rickne, 2000) and is, of course,
an ever bigger problem in cases where the TIS concept
is only an analytical tool for the researcher. Moreover,
in early phases networks are usually undeveloped and/or
informal and TIS-specific institutions may not yet exist.
In instances like this, the structural mapping must be an
iterative process, in which additional pieces of informa-
tion are added as the analysis proceeds.
Identifying the structural components of the system
provides a basis for the following step, which constitutes
the core of the analysis: analyzing the TIS in functional
terms.
6. Step 3: mapping the functional pattern of the
TIS
The first step of a TIS analysis in functional terms is to
describe the functional pattern of the TIS. This anal-
ysis aims at ascertaining to what extent the functions
are currently filled in that TIS, i.e. to analyze how the
TIS is behaving in terms of a set of key processes. This
step has no normative features; assessing the goodness
19 Institutional factors may be even more distant from the focal TIS.
Geels (2004) uses the concept of technological landscapes, which
influences many different TISs. Examples include the greenhouse
effect discussion.
of the current functional pattern will be dealt with late
in the paper. The functional pattern of a TIS is likel
to differ from that of other TISs and is also likely t
change over time. Thus, the concept should not be inter
preted as implying that the pattern is either repeated o
optimal.
In the following, we will explain each of these func
tions. As described above, they have been synthesize
from a number of different system approaches to inno
vation and have been applied and further developed b
ourselves and other researchers. We begin by explainin
the content of the function. We will then give a brief illus
trative example from various case studies that we hav
undertaken and examples of indicators that may reflec
the extent to which the function is fulfilled. Of course
it is not possible to come up with an exact figure bu
the analyst has to make a composite judgment based o
both qualitative and quantitative data. Exactly how tha
is done should be made explicit.
6.1. Knowledge development and diffusion
This is the function that is normally placed at the hear
of a TIS in that it is concerned with the knowledge bas
of the TIS (globally) and how well the local TIS perform
in terms of its knowledge base and, of course, its evolu
tion. The function captures the breadth and depth of th
current knowledge base of the TIS, and how that change
over time, including how that knowledge is diffused an
combined in the system.
We can distinguish between different types of knowl
edge (e.g. scientific, technological, production, marke
logistics and design knowledge) and between differen
sources of knowledge development, for example R&D
(Bijker, 1995; Edquist and Johnson, 1997; Hughes, 1983
Nelson, 1992), learning from new applications, produc
tion, etc. (Bijker, 1995; Edquist and Johnson, 1997
Hughes, 1990; Lundvall, 1992b) and imitation (Edquis
and Johnson, 1997; Nelson, 1992).20
An illustrative example is that of the emerging TIS
for solar cells in Germany (Jacobsson et al., 2004)
Initially, the type of knowledge development was lim
ited to the scientific/technological field and the sourc
was R&D on various competing designs for solar cells
The knowledge base was subsequently broadened as th
system expanded along the entire value chain. Firs
20 It should be noted that part of this knowledge development take
place in the form of entrepreneurial experimentation. In the functio
entrepreneurial experimentation, however, we focus on the unce
tainty reducing effects of these experiments rather than their results i
terms of knowledge development.
 A. Bergek et al. / Research Policy 37 (2008) 407429
application-specific knowledge was developed down-
stream as firms experimented with solar cells as a
building element. Part of the knowledge development
took place in schools of architecture where solar archi-
tects developed new design concepts. Second, upstream
technological knowledge was enhanced through R&D
performed by the capital goods industry. A significant
aspect of that knowledge development was, however,
also a very practical and problematic learning process to
build automated production lines for the manufacturing
of solar cells.
The current level and dynamics of the function
could be measured by a range of indicators, includ-
ing for instance bibliometrics (citations, volume of
publications, orientation); number, size and orientation
of R&D projects; number of professors; number of
patents; assessments by managers and others; and learn-
ing curves.
6.2. Influence on the direction of search
If a TIS is to develop, a whole range of firms and other
organizations have to choose to enter it. There must then
be sufficient incentives and/or pressures for the orga-
nizations to be induced to do so. The second function
is the combined strength of such factors. It also covers
the mechanisms having an influence on the direction of
search within the TIS, in terms of different competing
technologies, applications, markets, business models,
etc. These factors are not, of course, controlled by one
organization and definitely not by the state (apart from
the case of regulations, etc.) but their strength is the
combined effect of, for example:
visions, expectations (van Lente, 1993) and beliefs in
growth potential:
incentives from changing factor and product prices
(Dosi et al., 1990);
growth occurring in TISs in other countries;
changes in the landscape (Geels, 2004), e.g.
demographic trends and climate change debates;
and
development of complementary resources
(Dahmen, 1988),
actors perceptions of the relevance of different types
and sources of knowledge,21
21 For example, actors are more likely to look for new knowledge
within their current technological frame (McLoughlin et al., 2000) or
paradigm (Dosi, 1982).
415
actors assessments of the present and future techno-
logical opportunities and appropriability conditions
(Breschi et al., 2000),
regulations and policy (Lundvall, 1992b; Porter,
1990),
articulation of demand from leading customers (e.g.
Dosi et al., 1990; von Hippel, 1988; Carlsson and
Jacobsson, 1993),
technical bottlenecks or reverse salients
(Rosenberg, 1976; Bijker, 1995; Hughes, 1983;
Lundvall, 1992b), and
crises in current business.
Wind turbines in Germany (in the early phase of sys-
tem evolution) is an illustrative case in point, where firms
experienced a range of incentives to enter the indus-
try (Bergek and Jacobsson, 2003). In several cases, the
firms existing markets were in recession at the same
time as there was a Californian wind turbine boom and
an associated expansion of the Danish wind turbine
industry. These latter developments gave clear signals
about the attractiveness of the future wind turbine mar-
ket (i.e. expectations of future markets). Locally, there
was a green demand from some utilities and environ-
mentally concerned farmers (articulation of demand).
Federal R&D policy subsidized not only R&D in many
competing designs but also investment in wind turbines
in a number of demonstration programs (regulation).
We suggest that this function can be measured, or at
least indicated, by qualitative factors of the following
types:
beliefs in growth potential,
incentives from factor/product prices, e.g. taxes and
prices in the energy sector,
the extent of regulatory pressures, e.g. regulations on
minimum level of adoption (green electricity cer-
tificates, etc.) and tax regimes, and
the articulation of interest by leading customers.
6.3. Entrepreneurial experimentation
A TIS evolves under considerable uncertainty in
terms of technologies, applications and markets. This
uncertainty is a fundamental feature of technological
and industrial development and is not limited to early
phases in the evolution of a TIS but is a characteristic
of later phases as well (Rosenberg, 1996). From a social
perspective, the main source of uncertainty reduction is
entrepreneurial experimentation, which implies a prob-
ing into new technologies and applications, where many
will fail, some will succeed and a social learning process
416 A. Bergek et al. / Research Policy 37 (2008) 407429
will unfold (Kemp et al., 1998).22 A TIS without vibrant
experimentation will stagnate.
An analyst needs to map the number and variety of
experiments taking place in terms of, for example:
number of new entrants, including diversifying estab-
lished firms,
number of different types of applications, and
the breadth of technologies used and the character of
the complementary technologies employed.
To continue with the German wind turbine case in the
early phase of its evolution, it is clear that the diversity
in experiments undertaken was its main characteristic
(Bergek and Jacobsson, 2003). In the period 19771991,
a large number of industrial firms and a range of aca-
demic organizations received federal R&D funding for
the development or testing of a variety of turbine sizes
and designs. As a result of some of these experiments, at
least 14 firms entered wind turbine production, including
academic spin-offs, diversifying medium-sized mechan-
ical engineering firms and large aerospace firms, all of
which brought different knowledge and perspectives into
the industry.
6.4. Market formation
For an emerging TIS, or one in a period of transforma-
tion, markets may not exist, or be greatly underdeveloped
(Carlsson and Stankiewicz, 1995; Dahmen, 1988; Galli
and Teubal, 1997; Nelson, 1992; Porter, 1990). Market
places may not exist, potential customers may not have
articulated their demand, or have the capability to do so,
price/performance of the new technology may be poor,
and uncertainties may prevail in many dimensions. Insti-
tutional change, e.g. the formation of standards, is often
a prerequisite for markets to evolve (Hughes, 1983).
Market formation normally goes through three
phases with quite distinct features. In the very early
phase, nursing markets need to evolve (Erickson and
Maitland, 1989) so that a learning space is opened up,
in which the TIS can find a place to form (Kemp et al.,
1998). The size of the market is often very limited. This
nursing market may give way to a bridging market
(Andersson and Jacobsson, 2000), which allows for vol-
22 It should be noted the word entrepreneurial does not refer only
to new or small firms, but to the more general Schumpeterian notion
of an entrepreneurial function (i.e. making new combinations). This
function may be filled by any type of actor, including large, established
firms diversifying into the new technology.
umes to increase and for an enlargement in the TIS i
terms of number of actors. Finally, in a successful TIS
mass markets (in terms of volume) may evolve, ofte
several decades after the formation of the initial marke
To understand the sequence of the formation of mar
kets, we need to analyze both actual market developmen
and what drives market formation. The timing, size an
type of markets that have actually formed, are normall
quite easy to measure. For example, we could describ
a market for wind turbines in terms of the number o
turbines and/or the wind power capacity installed in
particular year and in terms of the distribution betwee
different customer groups (e.g. farmers and energy com
panies).
It is more difficult to analyze what drives that forma
tion, and the analyst needs to have in-depth knowledg
of the TIS to do so. We will illustrate the multitud
of factors that may drive or hinder market formatio
with the case of the Swedish mobile data TIS (se
Lindmark and Rickne, 2005). In this case, markets ar
often global, but the home market is still strategicall
important to test new concepts and products, to learn
and to obtain early revenues. Swift market formatio
is, therefore, of essence to any national TIS. Howeve
in the Swedish market, corporate and governmental us
is slow. Sluggish procurement procedures and unartic
ulated demand cause great uncertainty about current o
future user needs. In addition, Sweden lags behind coun
tries such as Japan and Korea with regard to the dominan
consumer market. Indeed, as of 2006 Sweden had a low
rate of adoption of mobile data services, much due t
unwillingness of operators to cannibalize current cas
cows within mobile telecommunication, inflexible pric
ing systems, lack of standards for platforms, problem
with complementary technologies and proprietary solu
tions.
The analyst needs to assess what phase the mar
ket is in (nursing, bridging, mature), who the users ar
and what their purchasing processes look like, whethe
the demand profile has been clearly articulated and b
whom, if there are institutional stimuli for market for
mation or if institutional change is needed. Indicators t
trace these developments include readily available fact
(as indicated above) on market size and customer group
as representing what has been achieved, but also quali
tative data on e.g. actors strategies, the role of standard
and purchasing processes.
6.5. Legitimation
Legitimacy is a matter of social acceptance and com
pliance with relevant institutions: the new technolog
 A. Bergek et al. / Research Policy 37 (2008) 407429
and its proponents need to be considered appropriate
and desirable by relevant actors in order for resources
to be mobilized, for demand to form and for actors in the
new TIS to acquire political strength. Legitimacy also
influences expectations among managers and, by impli-
cation, their strategy (and thus the function influence on
the direction of search).
As is widely acknowledged in organization theory,
legitimacy is a prerequisite for the formation of new
industries (Rao, 2004) and, we would add, new TISs (cf.
Bijker, 1995; Carlsson and Stankiewicz, 1995; Edquist
and Johnson, 1997; Hughes, 1983). Legitimacy is not
given, however, but is formed through conscious actions
by various organizations and individuals in a dynamic
process of legitimation, which eventually may help
the new TIS to overcome its liability of newness
(Zimmerman and Zeitz, 2002). However, this process
may take considerable time and is often complicated by
competition from adversaries defending existing TISs
and the institutional frameworks associated with them.
Although the process of legitimation is often closely
associated with institutional alignment, manipulation
of the rules of the game is only one of several possi-
ble alternative legitimation strategies; other alternatives
include conformance (following the rules of the exist-
ing institutional framework, e.g. choosing to follow an
established product standard) and creation (develop-
ing a new institutional framework) (Suchman, 1995;
Zimmerman and Zeitz, 2002). With respect to the lat-
ter, however, a new TIS seldom emerges in a vacuum,
but instead is often subjected to competition from one
or more established TIS. In such cases, some type of
manipulation strategy is usually needed.
Mapping the functional dynamics of legitimation
includes analyzing both the legitimacy of the TIS in the
eyes of various relevant actors and stakeholders (not least
the ones that could be expected to engage in the develop-
ment of the new technology, e.g. potential capital goods
suppliers and buyers), and the activities within the sys-
tem that may increase this legitimacy. So, we need to
understand:
the strength of the legitimacy of the TIS, in particu-
lar whether there is alignment between the TIS and
current legislation and the value base in industry and
society;
how legitimacy influences demand, legislation and
firm behavior; and
what (or who) influences legitimacy, and how.
An interesting illustration of the process of legitima-
tion is provided by the case of solar cells in Germany
417
(see Jacobsson and Lauber, 2006). After unsuccessful
efforts to convince the federal government to launch a
nationwide regulatory change in favor of the diffusion
of solar cells in the early 1990s, a number of activists
and interest organizations began lobbying work at the
Lander and local levels. After much effort, most Lander
expressly allowed cost-covering contracts between sup-
pliers of (very expensive) solar power and local utilities.
Several dozen cities subsequently opted for this model,
which revealed a wide public interest in increasing the
rate of diffusion the legitimacy of solar power was made
apparent. Various organizations could later point to this
interest when they lobbied for a program to develop yet
larger markets for solar cells, now at the federal level.
6.6. Resource mobilization
As a TIS evolves, a range of different resources
needs to be mobilized (Carlsson and Stankiewicz, 1995;
Dahmen, 1988; Edquist and Johnson, 1997; Hughes,
1983; Lundvall, 1992b; Nelson, 1992; Porter, 1990;
Rickne, 2000). Hence, we need to understand the extent
to which the TIS is able to mobilize competence/human
capital through education in specific scientific and
technological fields as well as in entrepreneurship, man-
agement and finance, financial capital (seed and venture
capital, diversifying firms, etc.), and complementary
assets such as complementary products, services, net-
work infrastructure, etc.23
As an illustration of this function, we will use a recent
analysis of the Swedish security sensor TIS (Oltander
and Perez Vico, 2005). The mobilization of human
resources was found to be strong, partly following a
recent reduction of personnel at the Swedish telecom-
munication company Ericsson. However, in specific
knowledge fields, such as radar and sonar technology,
there was a resource shortage, explained by an absence
of university education in these fields. The mobilization
of financial resources was more troublesome. In addi-
tion to a generally weak Swedish seed capital market,
there were also difficulties in attracting venture capi-
tal, resulting from (a) a cautious VC market in general,
and (b) a belief that Swedish start-ups will have prob-
lems competing internationally with US firms. In larger
organizations (e.g. Saab Bofors Dynamics and Ericsson
Microwave) there were some perceived difficulties in
raising funding for internal R&D projects, because of an
23 Here, we follow the reviewed literature on innovation systems,
where resource mobilization is treated as a process separate from the
other functions.
418 A. Bergek et al. / Research Policy 37 (2008) 407429
absence of strong customers and the ongoing transition
from military to civilian markets.
There are thus various ways for analysts to measure
resource mobilization:
rising volume of capital,
increasing volume of seed and venture capital,
changing volume and quality of human resources (e.g.
number of university degrees), and
changes in complementary assets.
In the analysis referred to above, Oltander and Perez
Vico (2005) used quantitative measures, such as the num-
ber of graduates from sensor-related education (absolute
and per capita) in comparison to Germany and Israel
and the number of venture capital firms with holdings in
the security sensor sector, together with qualitative data
based on interviews, such as perceptions about the sup-
ply of human resources and the VC firms interest in the
Swedish security sensor sector.
6.7. Development of positive externalities
The systemic nature of the innovation and diffusion
process strongly suggests that the generation of positive
external economies is a key process in the formation
and growth of a TIS.24 These external economies, or
free utilities, may be both pecuniary and non-pecuniary
(Scitovsky, 1954).
Entry of new firms into the emerging TIS is central
to the development of positive externalities. First, new
entrants may resolve at least some of the initial uncertain-
ties with respect to technologies and markets (Lieberman
and Montgomery, 1988), thereby strengthening the func-
tions influence on the direction of search and market
formation. Second, they may, by their very entry, legit-
imate the new TIS (Carroll, 1997). New entrants may
also strengthen the political power of advocacy coalitions
that, in turn, enhance the opportunities for a success-
ful legitimation process. An improved legitimacy may,
in turn, positively influence changes in four functions:
resource mobilization, influence on the direction of
search, market formation and entrepreneurial exper-
imentation. Third, the greater the number and variety
of actors in the system, the greater are the chances for
new combinations to arise, often in a way which is
unpredictable (Carlsson, 2003). An enlargement of the
actor base in the TIS therefore enhances not only the
opportunities for each participating firm in the system
24 See in particular Marshall (1920) and Porter (1990).
to contribute to knowledge development and diffusion
but also for the firms to participate in entrepreneuria
experimentation.
Hence, new entrants may contribute to a proces
whereby the functional dynamics of the TIS are strength
ened, benefiting other members of the TIS through th
generation of positive externalities. This function is thu
not independent but works through strengthening th
other six functions. It may, therefore, be seen as an indi
cator of the overall dynamics of the system.25
These dynamics may be enhanced by the co-locatio
of firms. Marshall (1920) discussed economies that wer
external to firms but internal to location, and outline
three sources of such economies:
Emergence of pooled labor markets, which strengthe
the knowledge development and diffusion function
in that subsequent entrants can access the knowledg
of early entrants by recruiting their staff (and vic
versa as time goes by).
Emergence of specialized intermediate goods and ser
vice providers; as a division of labor unfolds, cost
are reduced and further knowledge development an
diffusion is stimulated by specialization and accumu
lated experience.26
Information flows and knowledge spill-overs, con
tributing to the dynamics of knowledge developmen
and diffusion.
In sum, the analyst needs to capture the strengt
of these functional dynamics by searching for externa
economies in the form of resolution of uncertainties
political power, legitimacy, combinatorial opportunities
pooled labor markets, specialized intermediates, as wel
as information and knowledge flows.
To refer again to the German wind turbine case, w
will mention two forms of positive externalities. Firs
new entrants into the wind turbine industry, as wel
as into wind power production, increased the politica
power of the advocates of wind energy so that the
could win against opposing utilities in several courts an
defend a favorable institutional framework (Jacobsso
and Lauber, 2006). Second, as the market increased, spe
25 We are grateful to Professors Ruud Smits and Marko Hekkert o
this point. The dynamics are, of course, enhanced by the interdepen
dencies of the functions, as was pointed out above. As the system
moves into a growth phase characterized by positive feedback loop
these interdependencies are clearly seen.
26 See Smith (1776), Young (1928), Stigler (1947), Rosenberg (1976
and Maskell (2001). For a case study of mobile data in Western Sweden
see Holmen (2001).
 A. Bergek et al. / Research Policy 37 (2008) 407429
cialized suppliers emerged, with the consequence that
barriers to entry for yet more firms were lowered (Bergek
and Jacobsson, 2003).
7. Step 4: assessing the functionality of the TIS
and setting process goals
The analyst now has a description of the dynamics
of these seven key processes, or functions, in the evo-
lution of a TIS, as well as a tentative assessment of the
strengths and weaknesses of these processes. However,
the functional pattern does not in itself tell us whether
the TIS is well functioning or not; that a particular func-
tion is weak does not always constitute a problem, nor is
a strong function always an important asset. In order to
assess system functionality i.e. not how, but how well
the system is functioning we need ways to evaluate the
relative goodness of a particular functional pattern.
This is, of course, the same problem as we alluded to in
Section 2.2, i.e. evaluating the goodness of a particular
structure. The advantage with a functional analysis is that
we can systematically address the issue of goodness
in terms of the seven clearly specified key processes.
Although this is a step forward, we face here one of
the major challenges for analysts and policy makers, a
challenge that needs to be dealt with further in research
and in learning processes among practitioners. So far, we
have identified two bases for an assessment: (1) the phase
of development of the TIS, and (2) system comparisons.
Both are associated with different types of problem and
in order to balance each others weaknesses, they should
probably be used in combination.
7.1. The phase of development
We have earlier suggested that it is useful to distin-
guish between a formative phase and a growth phase in
the development of a TIS and that it is plausible that the
definition of functionality differs between these phases
(Bergek and Jacobsson, 2003; Jacobsson and Bergek,
2004). The analyst can then raise the question whether
functionality matches the needs of that particular phase
or the need of the next phase (if it is judged to be desirable
that the TIS is to move in that direction). In other words,
the functional pattern, i.e. how the functions, or key pro-
cesses, are performed and improved, can be analyzed
with respect to the requirements of each phase.
Although it is not always a straightforward exercise,
the analyst can use a number of indicators to know
whether or not a TIS is in a formative phase. In this phase
the constituent elements of the new TIS begin to be put
into place, involving entry of some firms and other orga-
419
nizations, the beginning of an institutional alignment
and formation of networks. A rudimentary structure is
formed. Apart from exhibiting rudimentary structural
components, the formative phase may be indicated by,
for instance:
the time dimension, where we rarely escape formative
periods that are shorter than a decade (yet they can last
for many decades, as in the case of solar cells);
large uncertainties prevailing as regards technologies,
markets and applications;
price/performance of the products being not well
developed;
a volume of diffusion and economic activities that is
but a fraction of the estimated potential;
demand being unarticulated; and
absence of powerful self-reinforcing features (positive
feedbacks) and weak positive externalities.
A common error made by analysts is to judge a TIS
that is in a formative phase by using criteria that are more
suitable for evaluating a system which is in a growth
phase. For example, the formative phase is not char-
acterized by a rapid rate of diffusion or rapid growth
in economic activities. On the contrary, the volume of
activities is small and many experiments take place the
TIS is in a process of formation. Yet, in several cases
we know of renewable energy technologies and wood
manufacturing, for instance emerging TISs were eval-
uated, by policy makers and others, by the volume (level)
of economic activities. Of course, this led to a great deal
of frustration and a feeling of disappointment and failure.
By applying other criteria, more suited for a formative
phase, a quite different interpretation would be made.
In particular, the formative phase is characterized
by high uncertainty in terms of technologies and mar-
kets (Kemp et al., 1998; Van de Ven, 1993), and
the key words are therefore experimentation and vari-
ety creation. This requires extensive entrepreneurial
experimentation in such a way that knowledge develop-
ment occurs within a number of different technological
approaches and applications. For this to take place,
influence on the direction of search and resource mobi-
lization must stimulate not only entry of firms but also
ventures embarked upon in many directions. Moreover,
a process of legitimation must start, helping to over-
come the liability of newness associated with new
actors and technologies and eventually leading to insti-
tutional change. Finally, knowledge development is
to a large extent dependent on cooperation between
actors (in networks), especially between suppliers and
buyers, which require market formation. Thus, either
420 A. Bergek et al. / Research Policy 37 (2008) 407429
established markets need to be open to new technolo-
gies/products, or new niches need to be identified and
stimulated.
At some point in time, the TIS may be able to change
gear and begin to develop in a self-sustaining way as
it moves into a growth phase. In this phase, the focus
shifts to system expansion and large-scale technology
diffusion through the formation of bridging markets and
subsequently mass markets; hence the need for resource
mobilization increases by orders of magnitude. Yet,
it is normally not self-evident which applications will
generate such markets, so a breadth of entrepreneurial
experimentation must be kept up. As and when the
growing TIS catches the attention of actors in com-
peting TISs, legitimation may become even more
important.
Although the phase thus presumably matters for how
we assess functionality, we want to emphasize that this
does not imply that all TISs follow exactly the same
development pattern. Indeed, the whole point of the func-
tional dynamics approach is that TISs differ so much that
there are no one size fits all policy implications. Hence,
although some features in TIS development are arguably
common to many innovation systems, we fully acknowl-
edge that the determining factors, time frames, etc., differ
between cases. We also acknowledge that more research
is needed to establish the nature of the different phases.
This implies that we must be careful not to specify a
desired functional pattern too rigidly, and need to be
open for reformulation and iteration in the process of
analysis.
7.2. Comparisons between TISs
Comparing the focal TIS with other TISs, across
regions or nations, is a powerful way of improving
the understanding for decision makers (see e.g. Rickne
(2000) for biomaterials in Sweden, Massachusetts and
Ohio, and Bergek and Jacobsson (2003) for wind
turbines in Sweden, the Netherlands and Germany).
Researchers and policy makers involved with a partic-
ular innovation system thus ought to perform analyses
of similar systems being developed elsewhere or of sys-
tems in related areas. Most importantly, they need to
address the question of how these other systems are
performing in order to gauge correctly not only what
development it is reasonable to expect of their focal TIS
but also in identifying the critical functions. For instance,
in our earlier work on the TIS centered on wind tur-
bines (Bergek and Jacobsson, 2003), Dutch researchers
pointed to weak market formation in the Netherlands as
an explanation of the perceived unsatisfactory develop-
ment of the TIS. Yet, in its formative phase, the Dutc
home market was larger (even in absolute terms) than th
German and much larger than the Swedish one. A searc
for an explanation would then shift to how an initiall
favorable position was not leveraged to propel the sys
tem into a growth phase ahead of the competing Germa
TIS.
Based on the phase analysis and/or one or mor
comparative analyses, a tentative conclusion regardin
functionality of the TIS may be drawn, that is, in rela
tion to what it is reasonable to expect taking the phas
of development and/or the comparison with other sys
tems into consideration. It is then also possible to specif
policy goals in terms of how the functional patter
should develop in order to reach higher functionality
i.e. towards a targeted functional pattern. Such goal
(e.g. broaden the knowledge base or widen the rang
of experiments) can be seen as process goals. Hence
policy goals may be expressed in terms of the seven ke
processes in contrast to final goals (such as growth). Pro
cess goals have the advantage for policy makers in tha
they are closer to the various instruments that can b
used, and they also make it easier to evaluate how wel
a specific policy works. In particular, in early phases o
development final goals may be close to impossible t
define, since the uncertainty regarding what the TIS ma
be able to achieve in the long term, also regarding an
what it is desirable to achieve, is very high.
8. Step 5: identify inducement and blocking
mechanisms
There are many reasons for expecting that the envi
ronment is biased, and will remain biased, in favor o
established TISs.27 New TISs may consequently exhibi
weak functional dynamics and develop slowly, or in
stunted way. The functional dynamics may be weak fo
a number of reasons. These may be found in features o
the structural components of the emerging TIS and i
the larger context surrounding it.28 This larger contex
includes the sector in which the new TIS operates, e.g
the electric power sector for the emerging TIS centere
on solar cells, but also factors that go beyond that secto
For instance, the reaction, or lack of it, to global warmin
27 Jacobsson and Johnson (2000) and Johnson and Jacobsson (2001
elaborate on various types of blocking mechanisms. See also Unru
(2000) for an extensive review of mechanisms locking us into a carbo
economy and Walker (2000) for a case study on entrapment in a larg
technological innovation system.
28 See e.g. Geels (2004), who distinguishes between regime an
landscape levels, where regime is broadly equivalent to the secto
 A. Bergek et al. / Research Policy 37 (2008) 407429
acts either as an inducement mechanism29 or as a block-
ing mechanism in many sectors, and this influences many
emerging TISs.
What is being achieved in the TIS is therefore only in
part a result of the internal dynamics of the TIS. Exoge-
nous factors also come into play, influencing the internal
dynamics. Myrdal (1957, p. 18) showed a keen under-
standing of the interplay between internal and external
sources of dynamics and even suggested that the main
scientific task is . . . to analyze the causal inter-relations
within the system itself as it moves under the influence of
outside pushes and pulls and the momentum of its own
internal processes.
From a policy perspective, it is particularly important
to understand the blocking mechanisms that shape the
nature of the dynamics. These could, for instance, be of
the following types:
The proponents of the new technology may be orga-
nizationally too weak to contribute to a legitimation
process; they may, for example, lose in a battle over
institutions as they attempt to achieve institutional
alignment to the new technology. Unaligned institu-
tions may then lead to poor market formation that, in
turn, limits the strength of the influence on the direc-
tion of search and entrepreneurial experimentation
functions.
Underdeveloped capabilities among potential cus-
tomers may lead to an absence, or poor articulation,
of demand which results in a poor development of
the dynamics of market formation, influence on the
direction of search and entrepreneurial experimen-
tation.
Networks may fail to aid new technology simply
because of poor connectivity between actors. Tight
networks may also through a lock-in effect have
an influence on the direction of search among
potential suppliers and customers away from the
new TIS.
As is evident from these examples, there may be quite
different things that block the development of functions.
The path to achieving a higher functionality may, there-
fore, be littered by a range of such blocking mechanisms.
These may operate in a formative stage, but they may also
obstruct a transition towards a more self-sustained TIS,
i.e. one which is to an increasing extent driven by its own
29 A case in point is the transnational legislation concerning tradable
emission permits which may influence investment decisions in many
TISs.
421
momentum rather than by outside pushes or pulls in the
form of policy.
It is empirically possible, and very useful, to map the
relationship between inducement/blocking mechanisms
and functional patterns. We will illustrate this with the
example of the emerging TIS for IT in home care,
which, as was noted above, is defined by the application
of a generic technology (IT) to a particular application:
care of elderly and ill people in their homes instead of in
a hospital. For a number of reasons (demographic, public
sector funding restrictions, technological opportunities,
etc.), this is a TIS which is thought of as having a large
growth potential.30 However, it is still in a formative
phase, as judged by, for instance, the following features:
There are no software standards and the technical
uncertainty is high.
The number of firms supplying IT solutions is small.
Markets are small, and characterized by high uncer-
tainty, e.g. with respect to applications and choice of
software.
The advocacy coalition for the TIS is weak.
The demand is poorly articulated by customers with
poorly developed capabilities.
In this formative phase, the functional pattern can be
summarized as follows:
Knowledge development and diffusion: pilot
projects in some of the 290 counties and 21 county
councils,
Market formation: local pilot projects constitute
nursing markets, albeit fragmented,
Influence on the direction of search: government
R&D funding, opportunities to find new markets,
awards,
Entrepreneurial experimentation: a few IT firms
have developed solutions,
Resource mobilization: EU and government R&D
funding, some co-funding by firms, poor adjustment
by the higher educational sector,
Legitimation: partly underdeveloped legitimacy,
especially among care providers, and
Development of positive externalities: early stage of
cluster formation in three cities.31
30 This is the judgment of VINNOVA (the Swedish Agency for Inno-
vation Systems).
31 Since we have not been able to determine how this function influ-
ences the other functions, we will not include it in the following
discussion.
422 A. Bergek et al. / Research Policy 37 (2008) 407429
Fig. 2. Inducement and blocking mechanisms as well as policy issues in the case of IT in home care. N.B.: The function Development of positiv
externalities has been excluded from the discussion (see footnote 30).
The current functional pattern is shaped by both
inducement and blocking mechanisms (see Fig. 2).
There are two significant inducement mechanisms: a
belief in growth potential and government R&D pol-
icy. The former is driven by a range of factors,
as was mentioned above.32 This inducement mecha-
nism has a bearing on the function influence on the
direction of search among both care providers (e.g.
county councils) and suppliers (IT firms), as well as
on the dynamics of market formation (nursing mar-
kets) and entrepreneurial experimentation. The latter
inducement mechanism both signals attractiveness and
provides resources for research and experiments. Hence,
it strengthens the functional dynamics of influence on
the direction of search and legitimation, as well as
resource mobilization and knowledge development
and diffusion.33
The blocking mechanisms are, however, strong and
manifold. Market formation is blocked by an absence
of standards (which leads to a fragmented market),
two factors that reflect poor awareness and capabilities
32 These include demographic changes with a larger share of elderly
people in the population, public sector funding restrictions and emerg-
ing technological opportunities.
33 Indirectly, it also strengthens entrepreneurial experimentation as
a consequence of its positive influence on the direction of search.
among potential customers (leading to poor articula
tion of demand) and an associated lack of knowledg
among suppliers of IT solutions of customer needs
Additionally, entrepreneurial experimentation, influ
ence on the direction of search and legitimation
are each blocked by two factors. These three have
common blocking mechanism in the form of a lac
of capability and a poor articulation of demand. Thi
is strengthened by an additional but different facto
in each case (uncertainties of customer needs, lack o
standard software solutions and a weak advocacy coali
tion).
Some mechanisms block several functions. In par
ticular, a poor articulation of demand (due to lack o
capability) blocks not only the three functions mentione
above but also market formation. Moreover, function
are not independent, but rather tend to reinforce on
another. A poor market formation affects negativel
both entrepreneurial experimentation and influence o
the direction of search, whereas little entrepreneuria
experimentation negatively influences resource mobi
lization and knowledge development and diffusion
This means that the impact of blocking mechanisms i
magnified by such interdependencies. Clearly, it could b
argued that policy must focus on reducing the strengt
of the blocking mechanisms that have such a pervasiv
effect.
 A. Bergek et al. / Research Policy 37 (2008) 407429
9. Step 6: specify key policy issues
Process goals were defined in the fourth step above.
Having made explicit both the reasons for setting these
specific process goals and how to measure whether
the goals are reached, we can now begin to spec-
ify the key policy issues related to the mechanisms
that block or induce a development of a desir-
able functional pattern. We argue that policy should
aim at remedying poor functionality in relevant TISs
by strengthening/adding inducement mechanisms and
weakening/removing blocking mechanisms. In doing
so, we take a step away from the traditional market
failure rationale for policy interventions into inno-
vation processes and focus on system failure in
terms of functional weaknesses rather than structural
deficiencies.
We will continue to use IT in home care as
an illustrative case and refer to the fourth column in
Fig. 2, where we list six specific policy issues con-
nected to removing or reducing the strength of the
many blocking mechanisms. The first three of these
focus on the potential customers (care providers) and
are aimed at removing the most pervasive blocking
mechanisms:
how to raise user capability so that demand is
articulated and uncertainties reduced for potential
suppliers;
how to support users in order to (a) increase their
knowledge of the benefits of IT in home care and of
ways to distribute the costs and benefits over orga-
nizational boundaries and (b) diffuse knowledge of
the outcome of early experiments in order to reduce
uncertainties further; and
how to support experimentation with new applica-
tions in order to reduce the level of uncertainty of
needs.
In addition to these three issues, we can also deduce
three additional ones, relating to one blocking mecha-
nism each:
how to develop standards in order to move from a frag-
mented market of 290 local councils and 21 county
councils;
how to alter research and education at universities in
order to allow for resource mobilization in terms of
staff with relevant background; and
how to support a weak advocacy coalition so that it
can improve the process of legitimation.
423
Hence, by analyzing weaknesses in the functional pat-
tern of the TIS (i.e. what is actually going on), we can
identify the key blocking mechanisms that, in turn, lead
us to a specification of the relevant policy issues.
10. Summary and discussion
The objective of this paper has been to make the inno-
vation system approach more useful to innovation system
researchers and policy makers by presenting a practical
scheme of analysis that can be used to identify the key
policy issues and set goals in any given TIS. We have
outlined six steps in such a scheme. The core of this
operationalization of the innovation system perspective
referred to the description and evaluation of seven key
processes, here labeled functions, in the evolution of a
TIS. The main benefit of this framework is that it focuses
on what is actually achieved in the system, rather than
on the structure of the system (the goodness of which
is difficult to evaluate without referring in a systematic
way to these processes).
The main application of the framework is the iden-
tification of system failures or weaknesses, expressed
in functional terms. Policy makers can also define pro-
cess goals of their intervention in terms of an altered
functional pattern, i.e. an altered way in which the
seven key processes are operating. By explaining the
nature of these processes in terms of the outcome of
a balance between various inducement and blocking
mechanisms, the functional dynamics approach can then
be used as a focusing device for policy makers that
seek to identify the key policy challenges for moving
a specific TIS towards these process goals.34 As the
functions approach includes a systematic mapping of a
larger number of key processes than in most previous
research, its use implies that a wider range of possi-
ble policy challenges may be identified. In consequence,
the functions approach further strengthens the tendency
of an innovation system perspective to open up richer
34 Here we need to remind ourselves of what Charles E. Lindblom
wrote many years ago: [p]olicy-making is a process of successive
approximation to some desired objectives in which what is desired
itself continues to change under reconsideration . . . Making policy is at
best a very rough process. Neither social scientists, nor politicians, nor
public administrators yet know enough about the social world to avoid
repeated error in predicting the consequences of policy moves. A wise
policy-maker consequently expects that his policies will achieve only
part of what he hopes and at the same time will produce unanticipated
consequences he would have preferred to avoid. If he proceeds through
a succession of incremental changes, he avoids serious lasting mistakes
in several ways (Lindblom, 1959, p. 86). See also Smits and Kuhlmann
(2002) on this point.
424 A. Bergek et al. / Research Policy 37 (2008) 407429
and more difficult innovation policies (Bergek et al.,
2007b).35
In the course of this scheme of analysis, we have
emphasized the many sources of uncertainties, not
only those that are inherent in the process of indus-
trial development but also those additional sources
facing the analyst in search of useful methods and
tools. We are still at an early stage in our understand-
ing of how TISs emerge and develop and we need
to learn a lot more about methods such as indicators
and, most importantly, about how to assess functional-
ity. In relation to the latter issue, three points can be
made.
First, there is, indeed, a need for more research on
how to assess TIS functionality, i.e. the goodness
of different functional patterns. In this paper, we have
presented two ways forward: assessment based on the
requirements of particular phases of development and
assessment based on comparisons between systems. It
would, however, be of benefit for the area of innova-
tion system analysis if generally applicable assessment
models could be developed.
Second, a promising way forward towards this aim
seems to be an assessment based on the phase of devel-
opment of the system. In particular, we need to better
understand the formative phase and establish to what
extent, and in what ways, the functional requirements of
that phase differ from those of later phases. Although
we acknowledge that systems are different and develop
in different ways, we do not think that the variation
is infinite. It ought to be possible and fruitful to
develop a taxonomy of archetypal development paths
with associated functional patterns by empirical investi-
gation.
Third, such taxonomy may also be needed in order
to better inform policy makers under what conditions
a transition between the formative phase and a growth
phase may occur and how the foundation for such a tran-
sition can be laid. A transition would involve leveraging
the investment made in the formative phase by inducing
a change of gear in the development of the TIS. As
shown in the case of wind power in the Netherlands and
solar heating in Sweden, a successful formative phase
does not necessarily lead to a successful growth phase
(Jacobsson and Bergek, 2004).
Finally, a scheme of analysis of this kind builds on
present knowledge and it is therefore by no means a
35 It also allows for comparisons between different TISs, which are
based not on structural characteristics but on the underlying mecha-
nisms of the innovation process and their changes in each system.
finished product. Only by a systematic learning proces
can we improve our understanding of the opportunitie
and limitations of innovation system analysis and polic
making. Therefore, we expect further empirical stud
ies in combination with the research outlined abov
to induce several revisions of the framework in th
future.
Acknowledgements
We are grateful to the editor and three reviewers fo
constructive comments. Thanks also to Sven-Gunna
Edlund at VINNOVA for inspiring us to do this wor
and to Cecilia Sjoberg who contributed to the case o
IT in home care.
Appendix A. Matching functions in the
literature36
As far as we know, there have been nine attempts t
identify functions that need to be filled for an innovatio
system to evolve and perform well: Galli and Teuba
(1997), Johnson (1998), Johnson (2001), Rickne (2000)
Johnson and Jacobsson (2001), Bergek (2002), Berge
and Jacobsson (2003), Carlsson et al. (2005), Liu an
White (2001), and Hekkert et al. (2007). In addition
Edquist (2004) lists a number of activities, defined a
those factors that influence the development, diffusion
and use of innovation (p. 190), which is based on
similar comparison as ours.
In the table below, we have matched the function
suggested by these authors, excluding Liu and Whit
(2001) since their framework is included in Edquist
(2004) synthesis.37 Most of these original functions ar
formulated as verbs, in contrast to the functions in thi
paper, which are formulated as nouns. This reflects
conscious choice on our part; as described above w
want to emphasise the process nature of the function
and remove any notion of a particular actor filling them
From the table, we can make the following observa
tions.
First, three of the functions are more or less identica
in all lists: supply resources, create knowledge an
stimulate/create market (except for Galli and Teuba
1997), although the authors differ in the degree o
36This section is based on Bergek et al. (2005).
37We have also excluded one of the functions identified by Galli an
Teubal (1997) policy-making since it refers to the activities b
one particular type of actor (i.e. policy makers) and can be directe
towards all functions.
 A. Bergek et al. / Research Policy 37 (2008) 407429
detail provided for each function.38 In this paper, these
functions are labeled knowledge development and diffu-
sion, resource mobilization, and market formation,
respectively.
Second, Bergek and Jacobssons (various) function
guide the direction of search is an aggregate of four
of Johnson/Bergeks (1998, 2001, 2002) functions (by
design) and corresponds, at least in part, to Hekkert et
al.s (2007) articulation of demand (which is much
broader than the demand articulation that others include
in market formation), to Carlsson and Jacobssons
(2004) incentives and to Ricknes (2000) direct tech-
nology, market and partner search. Edquists (2004)
function creating or changing institutions that provide
incentives or obstacles to innovation is broader and
applies also to another function in this paper (see below).
In this paper, all these functions are gathered under the
label influence on the direction of search.
Third, Bergek and Jacobssons (various) as well as
Carlsson and Jacobssons (2004) function promoting
positive externalities is much broader than Galli and
Teubals (1997), Johnson/Bergeks (1998, 2001, 2002),
Ricknes (2000) and Hekkert et al.s (2007), that focus
on one source of external economiesdiffusion of infor-
mation/knowledge. Indeed, this function was developed
a great deal in Jacobsson and Bergek (2004) and built
yet further on in Carlsson and Jacobsson (2004). In
this paper, we use the label development of external
economies for the broader concept. Knowledge diffu-
38 For example, in Rickne (2000) the function supply resources
corresponds to four different functions.
425
sion is included in the function knowledge development
and diffusion.
Fourth, Johnson/Bergeks (1998, 2001, 2002) coun-
teract resistance to change, which refers primarily to
the extremely important process of legitimation, may
be linked to Hekkert et al.s (2007) development of
advocacy coalitions, to Ricknes (2000) legitimize
technology and firms, to Edquists (2004) creating or
changing institutions that provide incentives or obsta-
cles to innovation, and to Galli and Teubals (1997)
design and implementation of institutions. Carlsson
and Jacobsson (2004) discuss this aspect under the head-
ing of incentives, and Bergek and Jacobsson (various)
included it into guide the direction of search. We are,
however, hesitant to include advocacy coalitions in a
function, since they are a kind of network, i.e. a struc-
tural component. In this paper, this function is labeled
legitimation.
Finally, the function promoting entrepreneurial
experiments mentioned by Carlsson and Jacobsson
(2004) is not explicitly mentioned by any of the other
authors, with the exception of Edquist (2004) who
includes enhancing entrepreneurship in his function
creating and changing organizations needed. In this
paper, we use the label entrepreneurial experimentation
in order to emphasize that it is the creation of new combi-
nations and variety that is in focus and that many different
types of actors not only new ones may contribute to
this function.
 426
This paper Johnson (1998), Rickne (2000) Bergek and Carlsson et al. Edquist (2004) Galli and Teubal Hekkert et al. (2007)
Johnson (2001), and Jacobsson (2005) (1997)
Bergek (2002) (various)
Knowledge Create knowledge, Create human capital Create new Creating a Provision of R&D, R&D diffusion of Creation of
development and facilitate information knowledge knowledge base competence building information, technological
diffusion and knowledge knowledge and knowledge
exchange technology
Entrepreneurial Create knowledge Create knowledge Promoting Creating and changing
experimentation entrepreneurial organizations needed
experiments (e.g. enhancing
entrepreneurship)
Influence on the Identify problems. Direct technology, Guide the Creating Articulation of quality Articulation of
direction of search Guide the direction of market and partner direction of the incentives requirements (demand demand. Prioritizing
search. Provide search. Create and search process side). of public and private

A. Bergek et al. / Research Policy 37 (2008) 407429

incentives for entry. diffuse technological Creating/changing sources (the process
Recognise the opportunities institutions that of selection)
potential for growth provide incentives or
obstacles to
innovation
Market formation Stimulate market Create market/diffuse Facilitate the Creating markets Formation of new Regulation and
formation market knowledge. formation of or appropriate product markets. formation of markets.
Facilitate regulation markets market conditions Articulation of quality Articulation of
(may enlarge market requirements (demand demand
and enhance market side)
access)
Development of Facilitate information Enhance networking Facilitate the Promoting Networking Diffusion of Exchange of
positive external and knowledge creation of positive information, information through
economies exchange positive external externalities, or knowledge and networks
economies free utilities technology.
Professional
coordination
Legitimation Counteract resistance Legitimize technology Creating/changing Design and Development of
to change and firms institutions that implementation of advocacy coalitions
provide incentives or institutions. Diffusion for processes of
obstacles to of scientific culture change
innovation
Resource mobilization Supply resources Facilitate financing. Supply resources Creating resources Financing of Supply of scientific Supply of resources
Create a labour (financial and innovation processes, and technical services for innovation
market. Incubate to human capital) etc. Provision of
provide facilities, etc. consultancy services.
Create and diffuse Incubation activities
products (materials,
parts, compl.
products)
Sources: Bergek (2002), Bergek and Jacobsson (various), Carlsson et al. (2005); Edquist (2004); Galli and Teubal (1997); Hekkert et al. (2007); Johnson (1998), Johnson (2001), Rickne (2000).
 A. Bergek et al. / Research Policy 37 (2008) 407429
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